In May, this year, the Reserve Bank of Australia released a new surcharging standard, which introduced a ban on excessive surcharges. The ban, which is being enforced by the Australian Competition and Consumer Commission (ACCC), commenced for large retailers this month but all other merchants have until 1 September 2017 to comply with it.
Consumer advocate Chris Zinn spearheads Surcharge Free – a national movement, backed by leading retailers, businesses associations and advocates, that urges merchants to end payment surcharges altogether.
Zinn hopes the new standard will reduce the $1.6 billion cost of surcharges to consumers each year. However, he is concerned some businesses may interpret the ban as a ‘green light’ for surcharging as long as they don’t do it excessively.
“While the ban prunes excessive surcharges, if there’s considerable growth in the number of businesses that surcharge, I think that will be net detriment to the consumer rather than the net benefit sought by the government,” he explained.
Zinn made a case for smaller merchants going surcharge free ahead of next year’s ban, rather than being of the mindset that ‘the RBA says surcharging below X amount is kosher, so I’m jumping on the surcharge bandwagon’.
“I encourage small merchants to trial going surcharge free in the lead up to the ban,” he said.
“They should use the next year to assess for the potential benefits of not surcharging, both to the business and consumers, and look critically at what their competitors are doing and what will give them more of a competitive edge.
“Some merchants hold the view that by not surcharging when others do they’re being left at a competitive disadvantage. Our view is that merchants that don’t surcharge, but instead absorb the cost or build it into the package price, have the competitive advantage because it demonstrates they put consumers first. Conversely, a surcharge is a clear signal that a merchant’s interests don’t lie with consumers.
“Research shows that more than 90% of consumers want surcharges eliminated, one in four don’t return to a business if surcharged, and three in four tell others to avoid a business because it surcharges. The benefit of going surcharge free far exceeds the costs of processing card and electronic payments in terms of repeat business, customer experience and word of mouth recommendation. It’s important for merchants to understand that while they can make short-term cost recovery by surcharging and thus shifting costs onto the consumer, by going surcharge free they can gain a competitive advantage that leads to growth.
“While a surcharge might be a nominal amount, for example 1 to 1.3%, merchants need to ask themselves: what is the cost of consumers not coming back or going somewhere else? If, come 1 September 2017, a merchant still feels it’s ‘all loss, no gain’, then they’re welcome to return to surcharging on the right side of the ban.”
Zinn noted a 2014 RBA discussion paper, which shows that the cost of a cash transactions, while less visible to a merchant than the cost of fees they pay to payment providers, are ‘not trivial’.
“The paper puts the cost of accepting cash at 2.5%, which is significantly above the cost of accepting plastic or other payment systems,” he said.
“Given the emergence of new payment systems and the move towards a cashless society, do we really want to get stuck in a world where cash is the one payment system that has no surcharge and others do? It’s ridiculous.”
